Oil slipped on Wednesday, with WTI dropping to $115 per barrel, below the $117 per barrel support. If the WTI price retreats, support can be found near $112 per barrel, while resistance can be found near the $121.2 per barrel level and higher up at $130 per barrel.
In a surprise move, the US Federal Reserve voted to raise its benchmark interest rate by 75 points on Wednesday, taking aggressive action against inflation. Record high US inflation rates have forced the Fed to ramp up its efforts by performing its steeper rate hike since 1994. Oil prices were pushed down by the higher-than-expected rate hike, although market expectations were turning in favor of a 75 rate hike since Tuesday, putting pressure on oil prices.
OPEC+ agreed in their latest meeting to raise their output goal by almost 648,000 barrels a day in July and August. Market investors doubt whether the organization can meet its production targets though and deliver its promised output.
On Tuesday, reports that OPEC production fell by 176,000 BPD in May compared to April, supported oil prices. Some of the group’s members are struggling to maintain their production quota, with supply worries further increasing oil prices.
The oil demand outlook has increased, as the beginning of the summer marks the start of the travel season, with increased traveling and driving, boosting oil demand. Last week, renewed Covid restrictions in Shanghai put a lid on the ascend of oil prices, although the Chinese economy is showing signs of recovery. The zero-Covid lockdown in Shanghai has officially ended, increasing the demand outlook and boosting oil prices. It seems however that Covid restrictions are not over in China, creating uncertainty in oil demand. China is the largest importer of crude oil and Covid lockdowns have dampened oil demand, pushing prices down.
Rising geopolitical tensions also support oil prices, as tight supply raises fears of an energy crisis, especially in the EU, as the latest package of EU sanctions against Russia includes a ban on Russian oil imports. This plan will effectively reduce EU oil imports from Russia by 90% by the end of the year and end the EU’s dependency on Russian oil.
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